Ottawa must play strategic role in seniors’ care; Federal government can influence policy without alienating provinces

Harvey Lazar | March 24th, 2012

Although researchers have been warning of the aging of Canada’s population for decades, governments do not yet have an overarching policy strategy to deal with the profound, long-term socioeconomic implications of this demographic shift, let alone its more immediate impact on seniors’ care.

There is an imbalance between the demand for and supply of care for seniors and an expectation that this imbalance will grow. This expectation demands a public policy response. Part of that response is to decide “who does what” to improve the outlook. The federal government has a unique responsibility in helping Canadians decide who, in fact, will do what.

Ottawa plays the lead role in the provision of retirement income for seniors, both through the public pension system and the tax incentives it provides for employer-sponsored pensions and private savings. “Elderly benefits” are the federal government’s single largest expenditure category. Federal cash transfer payments to the provinces for health and social services are almost as large and have a significant influence on the availability and accessibility of seniors’ care.

With population aging, pension costs will grow, mounting pressures on the health-care system and care needs will climb. At the same time, the share of the population of labour force age will shrink.

Ottawa will be called upon to do more.

There are many actions that the federal government can take to address the growing and underfunded care needs of seniors without undermining the leadership role of the provinces, or assuming responsibility for activities that do not square with its view of how the fiscal side of the federation should be managed. There are, however, two initiatives that it must take which are essential for wise decision-making on this issue.

The federal government must commission a diagnosis of how well the care needs of seniors across the country are being satisfied today, with realistic projections of demand and supply at least a couple of decades into the future. Such an initiative is consistent with other recent decisions Ottawa has taken that demonstrate an interest in the medium and longerterm challenges of population aging.

First, by putting the age of entitlement for Old Age Security and related benefits into play, the prime minister has demonstrated a willingness to take a longterm view of the public interest.

Second, the fact that Finance Minister Jim Flaherty is moving forward with income-tax amendments to facilitate the creation of pooled pension plans shows a concern for the economic security of tomorrow’s seniors.

Third, recent government announcements of proposed changes to immigration-selection criteria shows a concern for the long-run capacity of the economy to bear the weight of an older population.

Sophisticated models can be used to assess pension reform options, both for age of entitlement and pooled pension plans. But here is the rub. These models do not contain basic information about the costs of care and its incidence.

There is a good argument to be made that there is a missing piece of our retirement-income system because it does not build in the probability of substantial care costs.

The federal government must use its resources to help shine some light on the facts. This task is scientific, not political. It should be assigned to a person or organization that is, and is seen to be, at arm’s length from government.

Given the stance that the federal government has taken on the renewal of the health accord, including public remarks by Prime Minister Stephen Harper, it is clear the Conservative government has no wish to occupy space that is the constitutional responsibility of the provinces. This proposal is compatible with that view of the federation. Indeed, it will not be possible to know if Ottawa is meeting its current constitutionally based leadership role on pensions without such a diagnosis.

The federal government must then inform Canadians how it interprets the population-aging challenges that lie ahead, what it plans to contribute and what it expects of others – individuals, the family unit, friends and neighbours, business, the social economy, as well as provincial and territorial governments.

There are in fact many degrees of freedom for the federal government to show leadership in seniors’ care without intruding on areas of exclusive provincial constitutional jurisdiction. Denying the responsibility to exercise this freedom would be one degree of freedom too many.

Harvey Lazar, author of the study Many Degrees of Policy Freedom: The Federal Government’s Role in Care for Seniors, is an adjunct professor at the School of Public Administration and senior research associate at the Centre for Global Studies, University of Victoria.